Tuesday, 6 June 2017

Arrest decline in productivity and competitiveness in Malaysia

COINCIDENTLY, two major reports were released on June 1 on the decline of our national productivity and competitiveness. The first was our own Productivity Report 2016/2017, which was launched by Minister of International Trade and Industry Datuk Seri Mustapa Mohamad (pic) and the second one was the World Competitiveness Yearbook WCY issued by the Institute for Management Development.

This coincidence in decline is understandable since both productivity and competitiveness are closely inter-related. Lower productivity leads to lower international competitiveness.

Productivity

Our labour productivity fell short of our 11th Plan target of 3.7% growth by 0.2% to 3.5% last year. This is a small decline and has been rightly explained with confidence by the Minister of Trade in positive terms when he said that Malaysia was “on track”.

I think he will agree that we must be concerned enough to ask what are the causes and whether this is just a mere slip or could it be the beginning of a trend.

We have to take this fall as a wake up call, in case this decline happens again next year and later on. We have to review many recurrent and uncomfortable issues like brain drain and unemployed graduates - who could number over 200,000 - also reflect the low productivity of many graduates who are newly employed. The lower productivity can be attributed to our low use of automation, high employment of unskilled foreign and cheap labour and the new challenges of the digital economy.

The Minister’s proposal for the Government and private sector to “join forces to embark on initiatives” to improve productivity in nine sectors “of lower productivity”, is most welcome. The private sector has to make profit unlike the Government. Hence it has a greater sense of urgency in wanting to improve not only labour productivity but productivity from all factors of production, including good governance and integrity and quality services to the public. Thus it will be very interesting for the public to be made fully aware of the productivity improvements that should materialise not only in the private sector, but for the Government as well. For instance government departments can learn from the private sector how to provide better or excellent services in the fields of health and education and counter services at police stations, Customs, Immigration, etc .

Productivity in both the private sector and the government machinery should improve to raise our total national productivity. Only then will our nation be able to compete much more efficiently and effectively in the global economy.

We can have the best Productivity Blueprint like that which was launched on May 8 but our productivity can continue to slip and even slide, if we do not ensure that the blueprint is fully implemented and its progress diligently monitored and improved along the way. One way to seriously pursue our goal to raise productivity would be to increase the small sum of only RM200mil for a new Automation Fund. Modern machinery and equipment are expensive but the returns in terms of higher productivity can be very significant. So let’s go for higher productivity with greater automation and not approach the challenge on an ad hoc and piecemeal basis. The Treasury would need to support the Productivity Blueprint much more productively!

Competitiveness

Malaysia registered its lowest ranking in five years in the WCY.

This reflects our decline in productivity as competitiveness is the other side of the coin. However, I am surprised that the relationship is so sensitive. Just a drop of 0.2% in productivity can cause a drop in our international competitiveness ranking from 19th place to the 24th!

What this could show is that while we are sluggish in our productivity, other countries are much more aggressive in improving both their productivity and competitiveness.

There is thus no point in taking pride that we scored better in our ranking compared to the industrial countries like Austria (25th) Japan (26th) and Korea (29th). They are highly developed countries which enjoy much higher standards of living and a better quality of life that we do. They have reached the top of Mount Fuji and other mountains, while we are still climbing up from a lower economic base.

The drop in our competitiveness is significant and we have to take this decline very seriously. Malaysia slipped in all four sectors, that is, economic performance, business efficiency, government efficiency and infrastructure. That is why it is essential to investigate in depth into all these major falls in performance and tell the public what is being done to improve our rankings and ratings.

It is appreciated that Malaysia Productivity Corp’s Director General Datuk Mohd Razali Hussain has established Nine Working Cluster Groups to examine these poor indicators and report on improvements that must be made expeditiously.

Conclusion

It is good that we have these reports on productivity and international competitiveness to benchmark our national performance against them. We have to take advantage of these annual indicators and ensure that we keep improving rather than falling in productivity and competitiveness .

Our efforts to improve will be watched closely by our domestic and particularly international investors and international competitors .

We can only hope that these declines are not just coincidental but are also not developing declining trends. This could spell pessimism and falling confidence in our socio-economic management.

Instead we should take these set backs as warning signals and rededicate ourselves to a greater commitment to higher competition, more meritocracy and building a better socio-economic and political environment in Malaysia.